First it was Hero MotoCorp and Erik Buell Racing getting together to add expertise to the Indian company’s motorcycle endeavors and now comes word that BMW Motorrad is doing the same with TVS Motors as a way to better compete with Hero and Bajaj Auto Ltd., as well as the Japanese manufacturers doing business in India.
A collaboration will help TVS develop bigger motorcycles and be better equipped for the fast-changing Indian two-wheeler market. Even though two-thirds of motorcycle sales in India are in the entry-level segment — with engines in the 100-125 cubic centimeter range –the market for bigger motorcycles is expanding rapidly.
If nothing else, this certainly shows the 2 wheel market in India is doing quite well though both companies are being tight lipped about the details of this alliance.
Link: Wall Street Journal subscription required
john says
This is off topic, but reading the above reminded me of something I was trying to find out awhile back. I was trying to find a list of the top ten best selling motorcycles in the world by year for every year since 2000. The reason reading the above made me think of this is because the number one best selling bike in the world is made in India…the Hero-Honda Splendor. My hunch is that all ten will be from either India or China and that they will all have a copy of a Honda engine of some type and all be single cylinders under 250cc. TVS might even have one on the list. Maybe someone smarter that I can come up with some model names. I certainly see why BMW would want in the Indian market any way they can. India and China is where all the growth will be and the Indian government is more trustworthy than China’s.
anthrosciguy says
Thailand might have an entry in that top ten list, John. Probably a Honda.
GuitarSlinger says
The problem with doing business in India is that much like China the manufactures sell big numbers yet take in little if any profits . The automotive sector has been dealing with this reality for the last five years : only now acknowledging that “Yes Houston we have a problem ” and I’ll bet the M/C industry is in the same boat . Big sales numbers with minimal profit = long term ……… failure
todd says
big volume with low margin equals greater market share (more volume) and higher profits. That strategy works great for Target and Walmart who only pull in around 3% profit. 3% of $115-Billion is a lot in my book.
-todd
Tin Man says
Like the Slick Car Dealer mantra, We loose a little on each sale, but make it up on volume. LOL. Loss Leader sales may work for busting into a new market (Asian/US) but are not sustainable in the long run.
Menormeh says
Walmart and Target also deal in mass market products which get their customers in the door. The vast majority of these products are food, clothing, and other day to day items required for the average household to function.
The low end motorcycle industry appeals to those who wish to have cheap transportation. The fact is that most of those would by a car if they could. Therefore, it is likely that although they may purchase a bike first, they aspire to what they think is more suitable (a car) and will tend to drift away from the bike market leading to sales suicide. I believe your analogy is flawed……
john says
Most people in India walk or ride a bicycle or a donkey cart. They aspire to a motorcycle.
GuitarSlinger says
@ todd- Large volume with low margins works when the products you’re selling have such high margins to begin with as well as not being Durable goods … e.g. clothing , cleaning supplies etc etc . With Durable Goods such as M/C’s and Cars , with very low profit margins to begin with the ” Large Sales w/Low Margins ” formula is a recipe for disaster . Business 101 – Never compare Apples to Apple Picking Machines when doing a comparison to justify a point/strategy . Its a great way to go bankrupt 😉
Clyde says
Its amazing GS. You are an expert on every single subject on every single site.
Actually I feel a bit sorry for you.
john says
http://en.wikipedia.org/wiki/File:Bar_of_cars_motorcycles_population.png
Zippy says
I live and ride in the USA. Why would I care that BMW (or anyone else for that matter) wants to sell MCs in India?
anthrosciguy says
Menormeh makes a huge mistake there, as john points out. Same situation in Thailand. Sure, people aspire to buy a car (or a pickup truck for their business and to rent to others), but apiration means nothing without money — I aspire to own a fleet of exotic cars and antique motorcycles myself. But in Thailand, which I’m familiar with, a common situation is like the maid at our hotel I talked with about our bikes (my rented Airblade and her old Honda Dream). She bought hers for $600, which was about 5 months pay; she’s not in the market for a car (not to mention paying for the fuel).
anthrosciguy says
In Laos, people aspire to buy a Honda instead of a Chinese knockoff, but frankly many people are still in the position of apsiring to buy the Chinese knockoff. Whole villages get together to buy one motorcycle for communal use, which allows them to take their crops to a market and eliminate a middleman (vastly improving their income to the point where they’re merely extremely poor) and allows them to take sick villagers to a doctor (with obvious benefits). They are not going to be springing for a car anytime soon. It goes Chinese knockoff, then a trailer, then a sidecar, then a Honda. Cars don’t get a chance to enter the picture for the vast majority of people there.
Burma is even worse off.
Paulinator says
What happened to the market void that the TATA NANO was going to fill?
Jon Hutchison says
there is likley a market in India, but mu guess is that BMW and Harley are also looking at offshore production of at least components if not whole bikes, if the quality targets can be attained. Just look at Kymco as a toe in the water
Tin Man says
When you build a “premium”product saving a few $s on assembley is not as important as keeping your high end image. Yes, some parts are imported from slave wage areas but to import India made bikes to the US would be Brand suicide. Say what you want but BMW and Harley do know their customers, and they both are Gaining market share despite the premium price.
john says
You think Harley’s are made in America? Forks and carbs(when they still had them) were Japanese. So were other components…switches, light sockets, and wire plugs-ends especially. The wire was still American though. Pistons were made in Germany. Wheels made in Australia. Seats made in Mexico. This was the facts at the time I bought my last Harley which was a carburetted 2005 model purchased in 2004. You can bet your buns the outsourcing has only increased since then…and to lower wage earning nations.
Ubiratã Muniz says
There is also a H-D factory on Manaus, Brazil, which makes:
– Sportsters: XL 883R and N, XL1200C, XR1200X
– Dynas: Super Glide Custom, Fat Bob and Switchback
– Softails: Black Line, Fat Boy (STD and Special), Deluxe Heritage Classic
– Touring: Street Glide, Electra Glide, Electra Glide Ultra and Road King
– V-Rod and Street Rod
Okay, they are assembled on CKD, and probably sold only on Latin America, and parts come from all over the world, but not all Harleys are “made in USA” you know.
Hooligan says
Indian bike manufacturer Hero makes gearboxes for BMW. I think I read somewhere that a new Huskvana (owned by BMW) was to be built in India. It uses the 800 single engine built by Rotax (not BMW itself).
I disagree that it is brand suicide to manufacturer in the far east. Triumph build the Bonneville in Thailand and that fact has not hurt either sales of the Bonnie or taken the shine off Triumphs image or it’s other bikes.
Adopting the Ostrich position is not sustainable.
How many BMW cars are actually made in Germany? Has the fact they are made in places from Mexico to South Africa stopped their sales?
B50 Jim says
it’s a global marketplace. Like it or not, most large-production goods are assembled from parts made all over the world. My wife’s new VW Jetta has an engine built in Mexico and other parts sourced from providers all over Europe and the Pacific Rim. The days of large manufacturers making everything for their products like Ford did in the early 20th century are long over. Making parts all over the world might not be the best strategy — just ask Boeing about its Dreamliner — but it’s the way it’s done now.
But this isn’t the main discussion — BMW is simply looking at India’s growing middle class and trying to determine its demand for big motorcycles, hoping to gain market share from Harley and other manufacturers looking to establish themselves in the subcontinent. With a quarter of the world’s population, India represents a vast potential market, even if most of it lives at a subsistence level. The small percentage that will have disposable income translates into a large number of consumers.
Will Indian consumers go for recreational motorcycling? Face it, that’s what big bikes are for most riders in the “developed” world — a few ride bikes exclusively but most have cars for other transportation needs. Indian consumers might not see riding as attractive, especially in a country where vicious heat and torrential rains are common, and urban traffic makes Italian drivers look German. Indians most likely would opt for cars first. If middle-class Indians are to ride big motorcycles, the factories will have to really sell them on the concept in a country where small bikes are a step up from bicycles and oxcarts, not recreation but total practicality. I’m sure plenty of middle-class and wealthy Indians will see riding as recreation and a lifestyle, but will there be enough of them to justify large-scale operations there? Time will tell.
john says
Big bikes??
They mostly ride 50cc to 125cc bikes there now A big bike in India is 200cc. When BMW says they want to get involved in larger displacement bikes there, they are talking about 200-400cc range. That’s not a recreational vehicle. That’s a tow/haul vehicle.
Tin Man says
John, Do you know there are more Millionaires in India than the USA?? Yes there are vastly more dirt poor in India, but do to scale there is a very large number of “rich”as well. All the Third World countries have an upper class that does very well for itself, its all a matter of controling and exploiting the working class, a system now making a comeback in the USA much like the days of the Robber Barons.